Oil, Gas Production Decline in First Part of 1998

LAWRENCE--Kansas oil production dropped by about 10 percent during the
first five months of 1998, compared to the first five months of 1997,
according to statistics compiled by petroleum geologists at the Kansas
Geological Survey based at the University of Kansas.

Natural gas production dropped by about 17 percent.

The drop in oil production is almost certainly related to low prices,
said Survey petroleum geologists Timothy Carr and Paul Gerlach.

Kansas oil wells produced just over 15 million barrels of oil from
January through May of this year. That compares to about 16.6 million
barrels during the same period in 1997, a drop of about 9 percent.

Oil prices, currently under $10 per barrel in Kansas, have been low
through most of 1998. And that, says Carr, is part of the reason that
the state's oil production is down.

"Drilling of new wells is down and so is the servicing of older wells,"
said Carr. "That can be attributed to prices, which are historically
low."

It is also related to the age of many of the state's oil fields. Kansas
is known as a mature oil-producing area, meaning that many of the
state's fields were discovered in the 1950s and 1960s, or even earlier,
and are now playing out.

According to figures compiled at the Survey, 97 percent of the state's
41,500 oil wells produce an average of less than 10 barrels per day of
oil. Such wells are generally referred to as stripper wells. About
two-thirds of the state's production comes from stripper wells. The
average oil well in the state produces 2.4 barrels of oil per day.

"The production from these older wells declines over time," said Carr.
"With low oil prices, there's considerable risk that new technology will
not be applied to extracting additional hydrocarbons and that these
wells will be plugged and abandoned."

The number of wells that are highly productive, or produce more than 30
barrels of oil per day, dropped from 357 in 1997 to 254 in 1998.

Natural gas production also declined during the same time period. From
January to May 1998, natural gas production was 238 billion cubic feet,
compared to 288 billion cubic feet during the same period of 1997. That
represents a decline of about 17 percent.

"Most of the decline in gas production is related to lessening
production from southwestern Kansas," said Carr. "Oil and gas
production represent a significant component of the Kansas economy and
continued decline could have a significant impact, especially in
southwestern Kansas and the rest of western Kansas."